Whether you are the manager of your own business or an absentee business owner, you need a clear manager compensation structure for the personal training fitness manager position. Matt and Rick discuss 3 different scenarios and the best practices for manager compensation for each.
3 Scenarios for Manager Compensation
The first scenario we talk about is the owner-operator, where you are most likely in the management seat as the owner. In the Alloy Personal Training Franchise model, this might be as the Director of Training or as the General Manager. The owner-operator pays tehmself a salary just like you’d do if you were employing someone.
If you pay yourself a salary as an owner-operator, it will make it easier in the future to do multiple locations, quit the day-to-day operations, or even exit the business. The business model will be strong enough to pay for someone else to execute the manager’s role when that time comes.
In most cases, this isn’t the case with many owner-operators. They are not accounting for the expense of a manager and just take profit distributions. This can give a wrong impression about the profitability of your business. If you can’t pay yourself as a manager and realize a profit, it’s not a good thing for your business.
2. Semi-Absentee Owner
The second scenario would be if you want to be a semi absentee owner. With the Alloy Personal Training Franchise, many investors coming to Alloy are also gainfully employed. They may want to keep their day job, start the business, and then eventually transition into it. They may loan their time to the new business to learn it and will need to find a manager? How should you determine the manager compensation? If you’re a semi absentee owner, it might mean you’re part time, doing the books or helping with sales. You also may learn how to become a personal trainer to work in your businesses. So if you’re giving your business some of your bandwidth, but not enough to necessitate a salary. You still should pay yourself, just as you would have paid a staff member. Now your manager compensation structure should be based on them not running the business completely on your behalf because you still have to be there. You’re around enough to give this person coaching and support. In that case, pay the manager a salary according to the Alloy business model. Offer some bonuses or bonus triggers to make the job more appealing to an experienced talent pool.
So let’s say that we are in the larger Alloy Personal Training model, if you are at $25,000 a month, you do a $500 a month bonus and at $30,000 another $500, etc. If you are in a market where the salary $50,000 with personal training of 3,035 hours a week and managing 2 part-time trainers. So if you’re working for me as a manager because I still have a day job, I’m happy to pay that person a salary and provide performance bonuses because it directly tied their job to the overall performance of the business. This is Rick’s semi absentee suggestion based on best practices would be some type of salary, plus some bonus triggers based on performance.
3. Full Absentee Owner
Now, the last scenario is full absentee owner. You’re an investor, but you never want to go into the business. The owner is going to fund and build the business structure as an Alloy Personal Training Franchisee, but will need to hire an operating, managing partner. In this case, Rick suggests the manager compensation be a revenue share plus salary. Besides the salary, there is some type of revenue sharing, so there’s a feeling or perception of ownership. That’s different from bonus triggers at certain revenue. Real revenue sharing is a different because now you have a higher level manager who’s also paying attention to expenses.
Listen in for more details on manager compensation scenarios Rick and Matt discuss and how to structure them to maintain the health of your business.
- How the compensation structure works in an owner-operator model (02:57)
- What paying yourself a salary says about your business (03:55)
- Best manager compensation practices for a semi-absentee owner (07:01)
- Should you pay the manager a performance-based bonus (08:37)
- How does a full-on absentee investor structure manager’s compensation (10:23)
- How to create a feeling of ownership with your managers (12:07)
- 50/50 partnerships management structure (14:17)
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